If you are considering divorce or beginning the process of getting divorced, you must review your estate plan to make sure it reflects your life change. Keep in mind that it doesn’t matter how far along the divorce is or how long the action has been pending; the law considers you to be legally married until the judge signs the final decree ending the marriage.
If you die or become disabled before the final decree of divorce, your estranged spouse may still have legal control over you and your estate and may be entitled to most, if not all, of your estate. This may not be what you intended.
Through proper estate planning documents, you can provide that someone other than your former spouse will have control over you and your estate, and you can limit your estranged spouse's rights as a beneficiary of your estate.
Divorce and Your Will
If you created a will before you were divorced, most states' law provides that any provision in the will for the benefit of your former spouse is ineffective. The will is not revoked; it is interpreted as if your ex-spouse had predeceased you.
It's important to know that in a few states, the will stands and the former spouse may inherit. Consult with an attorney if you're concerned about an ex inheriting your estate.
The rules of the law apply only to the ex-spouse. If your will makes provisions for the ex-spouse’s children (or more remote issue) or other relatives of your ex-spouse and is not wholly revoked by the divorce, these provisions of the will still stand. The divorce does not affect them.
If you made a will before the divorce and indicated in the document that you intended the provisions for your soon-to-be ex-spouse to be valid after the divorce, then your announced intention overcomes the law.
Divorce and Your Trust
If you die during the divorce and before the final decree, the rule of law excluding your pending ex-spouse does not help you. If your will leaves everything to your soon-to-be ex, that’s who will get your estate.
Any other estate planning document, such as a trust, will also be interpreted in the same way provided that it is revocable at the time of your death. If you have made a revocable inter-vivos trust, sometimes called a living trust, provisions in this document for your ex-spouse will be invalid.
The fact that the trust must be revocable for this rule to apply is important. If you made an irrevocable trust before your divorce, such as an irrevocable life insurance trust”, and your ex-spouse is a beneficiary of that trust, the law will not save you.
In an irrevocable trust, if the transfer to the trust was made prior to the divorce and the ex-spouse’s property rights were determined at that time, it cannot be changed.
To avoid unintended results in this scenario, it is essential to specify that a divorce will remove the current spouse as a beneficiary. Using the terms “wife,” “husband” or "spouse" in the document means whomever you are married to, not a specific individual.
Divorce and Your Power of Attorney
If you have signed a power of attorney giving your spouse the authority to act as your agent, in most states this grant of power is revoked when either spouse files an action for divorce.
Until the action for divorce is filed, the spouse can act using the power of attorney—this can be a hazardous situation. Note that unlike the will, the provision naming the spouse as a power of attorney is usually revoked when the divorce action is filed, not at the final decree.
Unless you revoke a power of attorney when you and your spouse separate they can still use it. In states where spouses must be separated for a specific amount of time before filing for divorce, a spouse with power of attorney can wreak havoc.
When a divorce action is filed, only the spouse's appointment as an agent in the power of attorney is revoked. If the power of attorney includes an appointment of the spouse as guardian—if a court-appointed guardian is necessary—filing for divorce does not revoke that appointment.
Instead, a court would have to decide if filing for divorce is a good reason not to appoint a spouse as a guardian. When the divorce becomes final, however, the appointment of the ex-spouse as guardian is revoked.
Divorce and Your Living Will
Another issue to think about during a pending divorce is health care issues. Have you remembered to change your living will and medical directive? In some states, filing for divorce or being granted a final divorce decree doesn't revoke a spouse's designation as an agent under your medical directive.
Arguably, the agent is the same as an agent under a power of attorney and under the law of most states, an agent’s power is terminated when divorce is filed.
If an ex-spouse is designated as a beneficiary on a life insurance policy, annuity contract, pension, profit-sharing plan, or other contractual arrangement providing for payments to the spouse, most state laws provide that any designation which was revocable at the time of death is ineffective. This means that the ex-spouse, while still listed as a beneficiary, does not receive any benefits that could be revoked.
However, if the designation or a separate contract (such as a property settlement agreement) provides that the designation is to remain in effect even after the divorce, then the appointment remains effective,
Note that the financial institution involved will not know whether or not there has been a divorce. If the ex-spouse claims the benefit as the named beneficiary, most state laws specifically provide that the paying company shall have no liability.
Ex-spouses are liable, but as is always the case with financial liability, one can only recover funds if the defendant still has the funds and has not spent them.
If you are considering divorce or are in the process of getting a divorce, it is essential to discuss your needs with a trusted estate attorney so that you can guarantee that you and your estate are protected.